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Toll Brothers Swings to Loss on Writedowns

Toll Brothers, the largest U.S. luxury home builder, Wednesday reported a quarterly loss after recording heavy writedowns during its fiscal first quarter.

George Widman

Toll posted a first-quarter loss of $96 million, or 61 cents per share, for the quarter ended Jan. 31, including $245.5 million in pretax writedowns relating to land and other assets. A year earlier, it posted a profit of $54.3 million, or 33 cents per share.

Total revenues for the first quarter dropped 23 percent to $842.9 million.

Toll signed a total of 904 contracts for new homes in the quarter, down about 38 percent from a year earlier. The value of the contracts fell 46 percent to $573.1 million. The average price of a home under contract was $634,000 compared with $646,000 in the prior quarter.

In the first quarter, signed contracts after cancellations totaled 647 homes, or $375.1 million, a decline of 37 percent in units and 50 percent in dollars.

Due to its fiscal calendar, which includes January results, Toll is one of the first major home builders to report earnings. Investors use it as an indicator of industry performance.

The U.S. housing market has been in a tailspin for more than two years, with demand falling and builders cutting prices despite dwindling orders.

Sales of new, U.S. single-family homes plunged 26 percent in 2007, the U.S. Commerce Department reported, falling 4.7 percent in December to an annual rate of 604,000, the slowest pace since 1995.

To navigate the downturn, U.S. builders have shifted their focus to survival, turning the excess land and inventory accumulated during the boom times of 2002 to 2006 into cash.

Investors also have put their dollars in companies they believe will endure the downturn.

In the meantime, investors have been judging the home builders on the viability instead of profitability.

Toll Brothers ended its first quarter with about $950 million in cash and more than $1.2 billion available under its bank credit facility.

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